Finding The Right Loans

4 Important Tips For Taking Out An Equity Loan

22 September 2020

April George

If you have been paying off your mortgage for a while, you have built up equity in your home. The equity is the value that you have built up in your home via the payments you have made on your mortgage; it represents the money you would get if you sold your home today, after you paid off your mortgage. You can borrow against the equity in your home with a home equity loan.  

Important Tip #1: Check Your Credit Score

Even though you are borrowing against the equity that you have built up in your home, your credit score still matters. Your lender is going to check out your credit score. Your credit score will impact the rates you are given for the loan and the repayment options you will be offered. It is important to check your credit score to make sure there are no errors in the report, and if there are errors, take the time to fix them before looking for a lender to work with on a home equity loan.

Important Tip #2: Figure Out How Much Equity You Have

Second, you are going to want to figure out how much equity you have created. You can figure that out by figuring out the value of your home and subtracting your remaining mortgage. The remaining figure should be the equity that you have in your home. It is important to know this number, as most lenders will only lend you a portion of the equity you have built in your home.

Important Tip #3: Compare Different Lenders Office

Third, you are going to want to compare offers from multiple lenders. The first lender you should start with is with the lender who you have your mortgage with. From there, try out a few other lends. You may want to get offers from both local credit unions as well as larger national banks. That way, you will have some offers from different lenders to compare in order to see which offer meets your needs the best.

Important Tip #4: Know Why You Need the Money

Fourth, you are going to want to make sure you know why you need the money. You don't want to take out money for any reason. You likely will want to use this type of loan to consolidate your debt, or to fix up your home and further improve the value of your home.

When it comes to taking out a home equity loan, make sure you know how much value you have built in your home, and what your credit score is. Be sure to compare offers from lenders and have a purpose for the money you are borrowing.

For more information about an equity loan, contact a local loan company. 

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